EuroFinance

Does the passage of the GENIUS Act in the United States represent a break from monetary tradition—or a subtle reshuffling of it? EuroFinance sat down with Sangita Gazi to explore how stablecoins fit into the evolving hierarchy of money, and why the change may be less radical than it first appears.

Gazi, lecturer and postdoctoral research fellow at the Wharton School and technology law fellow at Stanford Law School, is careful to frame the shift in those terms, “the GENIUS Act is best understood not as a regulatory framework to create new money, but as a statutory anointment of a particular rung within the existing hierarchy.”

That hierarchy is foundational to how modern finance operates. Central-bank reserves sit at the apex; commercial-bank deposits, convertible into those reserves, occupy the tier below; and beneath them lies a broader ecosystem of private liabilities—useful, often liquid, but lacking full sovereign backing. Stablecoins, until recently, were part of this lower tier. As Gazi notes, they were “unregulated promises to pay dollars held by non-bank issuers,” structurally closer to offshore Eurodollars than to insured deposits.

The GENIUS Act does not move Stablecoins into the core of the financial system but by imposing 100% reserve backing in high-quality liquid assets, alongside disclosure and audit requirements, it pulls a subset, payment stablecoins, closer to the domain of regulated bank money. They begin to resemble narrow, fully backed liabilities: safer instrument by instrument, though still without the institutional guarantees that define deposits.

According to an International Monetary Fund report of December 2025, the market capitalisation of the two largest stablecoins has tripled since 2023, reaching a combined $260 billion. Trading volume has increased 90%, amounting to $23 trillion in 2024. The same report added, Asia leads with the highest volume of stablecoin activity, exceeding North America. Relative to gross domestic product, though, Africa, the Middle East and Latin America stand out. Most of the flow is from North America to other regions.

According to European Central Bank’s Financial Stability Report published in Nov 2025, the European Union has taken significant steps to regulate crypto-assets through the full implementation of its Markets in Crypto-Assets Regulation (MiCAR)

last year, providing clear rules for stablecoin issuers and those offering stablecoin-related services.

“While US dollar-denominated stablecoins make up around 99% of all stablecoin supply in circulation, euro-denominated stablecoins play a minor role, totalling only around €395 million,” the Financial Stability Report added.

For corporate treasurers, this shift is less philosophical than operational. Stablecoins have moved from the periphery to the edge of acceptability. As Gazi notes, they are now “understandable to credit, audit, and risk committees in ways they previously were not,” a change that matters as much for internal governance as for external regulation.

A system that adds layers, not replaces them

The temptation is to interpret this as a contest between public and private money. Gazi resists that binary. Drawing on her broader work, she argues that “the correct framing is not public-versus-private money but the continuing coexistence of the two.”

Gazi added, stablecoins do not displace existing monetary forms; they insert themselves between them. They are privately issued, yet anchored in sovereign assets. They borrow credibility from the state without being fully absorbed into it. The result is a new “mezzanine” layer—one that complicates the hierarchy rather than simplifies it.

For corporate finance, the implications are practical. The relevant question is not whether stablecoins will replace bank deposits, but how different forms of money are best deployed. Deposits remain embedded in credit creation and regulatory protection. Stablecoins, by contrast, are emerging as tools of movement—efficient conduits for payments and liquidity.

Extending the dollar’s reach

Much of the commentary around stablecoins has focused on their potential to reinforce the dollar’s global dominance. Here, too, Gazi urges caution.

The basic facts are straightforward: even before the GENIUS Act, the overwhelming majority of stablecoins were already dollar-pegged. Regulation improves their quality and credibility; it does not alter their denomination. More importantly, the foundations of dollar dominance lie elsewhere. As Gazi puts it, “dollar dominance in trade invoicing and reserve holdings is a function of deep structural factors… and a payment-layer innovation does not move any of those levers directly.”

According to Gazi, Stablecoins offer genuine utility for corporate treasuries, but their risks extend well beyond dollar dominance:

1. Issuer solvency and reserves — A stablecoin is a liability of its issuer, so reserve quality and financial health must be assessed independently. When SVB collapsed in 2023, USDC briefly lost its peg simply because Circle held reserves there, she noted.
2. Operational and technological risk — Smart-contract bugs, price feed manipulation, bridge failures, and key mismanagement are entirely new failure points that most treasury teams have little experience governing.
3. Liquidity and redemption under stress — A stablecoin may hold its peg in normal conditions but fail during a market panic, especially if reserves are opaque or redemption is restricted. Unlike bank deposits, they also cannot pay interest.
4. Regulatory fragmentation — The US, EU, Hong Kong, Singapore, and Japan each regulate stablecoins differently. A treasury complaint in one jurisdiction may inadvertently breach the rules of another in cross-border settlements.
5. Foreign exchange risk — For companies in emerging markets, a dollar peg does not eliminate currency risk. Widespread adoption can trigger unintended dollarization, creating macroeconomic instability that feeds back into business risk.

Those levers—deep treasury markets, entrenched trade practices, and geopolitical trust—do not change easily with technology in  payments. What stablecoins can do is extend access to dollars at the margins. They make it easier for firms and individuals in jurisdictions with weak currencies or limited banking access to hold and transact in dollars, Gazi added.

They act like a digital version of the offshore dollar system, updated for a 24/7 financial environment.

How can stablecoins prove their value?

If stablecoins are to justify their growing prominence, it will be through practical uses, not vague promises. Cross-border payments offer the clearest example.

The current system’s inefficiencies are well known. Organisations keep large pre-funded balances in different areas to ensure payments are clear. Transactions move through multiple banks, adding cost and delay. The result, as Gazi notes, is trillions of dollars in effectively trapped corporate liquidity.

Stablecoins could reduce this friction. Settlement times could potentially be reduced from days to minutes; payments work 24/7; the need for pre-funding decreases.

Treasury teams, Gazi observes, frame the benefit in pragmatic terms. Rather than speaking of blockchain or crypto, they describe stablecoins as “always-on USD correspondent rails.”

A second potential use lies in liquidity management. Stablecoins could allow treasurers to sweep cash across subsidiaries in real time, regardless of time zone, and to deploy idle balances more efficiently.

However, beyond these two applications, their appeal for treasurers weakens. In particular, stablecoins are not well suited as a store of value. As Gazi explains, “the economics of the GENIUS regime mean the yield accrues to issuers, not holders,” making them worse than options like tokenised money-market funds for returns.

Risk, concentrated and redistributed

If stablecoins promise efficiency, they do not abolish risk. They reshape it.

Gazi quoted the episode surrounding Silicon Valley Bank in March 2023 and noted it remains instructive. When exposure to the bank was disclosed, a major stablecoin broke its peg, triggering instability across related assets. The episode revealed three distinct vulnerabilities: counterparty risk in reserve holdings, liquidity risk in redemption timing, and contagion risk across interconnected platforms.

Regulation addresses some of these issues. Reserve diversification reduces counterparty exposure; disclosure improves transparency. But structural weaknesses remain. As Gazi puts it, “GENIUS narrows but does not eliminate” these risks.

Other risks are less widely discussed. Operational vulnerabilities persist in blockchain infrastructure. Governance, often described as decentralised, can in practice be concentrated among a small set of actors. Regulatory uncertainty remains, particularly for non-dollar stablecoins and foreign issuers.

Most importantly, the system lacks an ultimate backstop. As Gazi cautions, “there is still no formal lender of last resort for payment stablecoin issuers.”

The implication is clear: stablecoins may behave like money in normal conditions, but in stress, their limitations become visible.

A new craft within treasury

For corporate treasury functions, the rise of stablecoins is not simply a technological shift. It is an organisational one.

Teams must develop a more detailed understanding of risk. What appears as a single instrument in a balance sheet entry—“stablecoin holdings”—in fact embeds multiple exposures: to the issuer, the blockchain, the custodian, and the liquidity channels that connect it to traditional finance.

They must also assume responsibilities that were previously outsourced to banks. Compliance is a notable example. As Gazi notes, “corporates will be directly exposed to compliance obligations that banks used to absorb on their behalf.”

The response, she suggests, is structural rather than incremental. “The mature organisational answer is a small, cross-functional ‘digital treasury’ pod that sits between finance, IT, and legal,” bringing together the capabilities required to manage this new environment.

The frictions that remain

Despite growing interest, stablecoins have not yet become a mainstream treasury instrument. The reasons are both institutional and technological.

Accounting treatment remains unsettled. Tax implications are complex. Integration with enterprise resource planning systems is incomplete. Governance frameworks are still evolving, she added.

Interoperability is perhaps the most significant constraint. A fragmented ecosystem limits usability. As Gazi puts it, “a stablecoin that only moves on one chain… is not a treasury instrument — it is a point solution.”

Until stablecoins can move easily across chains, wallets and banking systems, their role will remain limited.

While stablecoins challenge aspects of banking—particularly in payments—they do not replicate its core functions. Credit creation, deposit insurance and central-bank support remain essential.

As Gazi puts it, “banks are not going away, but their role is being unbundled.”

The emerging system is likely to be layered: bank-issued tokenised deposits, privately issued stablecoins, and central-bank liabilities coexisting. Banks that adapt to this architecture will remain central intermediaries.

Alongside cash, not instead of it

In the near term, stablecoins will not replace cash. They will complement it.

Gazi’s forecast is measured. She argues that “stablecoins will sit alongside cash in the vast majority of corporate use cases over the next three to five years, rather than replace it.”

Their growth will be concentrated where inefficiencies are greatest—cross-border and business-to-business payments. Domestic systems will remain dominant, valued for their legal certainty and integration with monetary policy, Gazi added.

Over time, however, the composition of “cash” itself may evolve. As deposits, money-market funds and government securities become tokenised, distinctions may blur in practice, even if they remain sharp in regulation.

A foundation still under construction

The GENIUS Act establishes a framework. It does not complete it.

Key questions remain unresolved: the provision of liquidity in times of stress, the interaction of different regulatory regimes, and the treatment of diverse stablecoin models. The system being built is partial and evolving.

Gazi’s conclusion is deliberately cautious. She describes the legislation as “a solid foundation… but ‘foundation’ is the operative word.”

Stablecoins are not remaking money. They are being fitted into it—carefully, incrementally, with consequences depending more on institutions than technology.

Sangita Gazi, lecturer and postdoctoral research fellow at the Wharton School, will be speaking at the EuroFinance’s 30th International Treasury & Cash Management Summit Miami in May.  Alongside Dimitrios Psarrakis, Senior fellow, Wharton Blockchain and Digital Assets Project at The Wharton School and Ramana Kumar President of stablecoin ecosystem at ADI Foundation, in the session “Stablecoins and the future of financial infrastructure”.